While other Vermont schools have considered divestment, only two have followed through

Sep. 30, 2013

Oil rigs and cash / Getty Images/Comstock Images

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Free Press Staff Writer

UVM students undertake a silent protest on Wednesday at the trustees' investment subcommittee meeting over the push for fossil-fuel divestment. / TIM JOHNSON/FREE PRESS

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The students pushing for fossil-fuel divestment came to the University of Vermont trustees' investment subcommittee meeting prepared for a silent protest, with duct tape over their mouths, but they were in for a surprise or two.

First of all, the trustees' half-hour divestment discussion on Wednesday afternoon took place in public — not in executive session, as the meeting's agenda had implied. That implication had inspired the duct tape.

Second, the students learned that one of their demands had already been met, sort of.

The university's endowment fund managers sold the holdings in BlackRock All-Cap Energy & Resources Fund in July — but not for the reason the students promoted. BlackRock, a mutual fund heavy on fossil fuels, was dumped because of poor performance, said Sam Bain, chairman of the subcommittee.

By contrast, the student activists, along with a university advisory committee established to study the divestment question, wanted an exit from BlackRock precisely because of its fossil-fuel holdings, especially in coal companies. Instead, BlackRock was supplanted in the UVM endowment portfolio with another energy mutual fund — RS Global Natural Resources — that’s more heavily invested in natural gas.

The UVM endowment fund — worth about $388 million at the end of August — continues to include other investments in fossil-fuel companies that amount to close to 10 percent of the portfolio’s value. And trustees have yet to take any formal action on a nuanced divestment proposal submitted last spring by the advisory committee.

So, the divestment campaign at UVM isn't over, at least as far as Student Climate Culture, the student group that's the main driving force, is concerned.

"The University of Vermont will live up to its reputation as a school that is working towards environmental stewardship," wrote Caroline DeCunzio, a group member, in an email after the meeting, "and Student Climate Culture will not rest until the imminent climate crisis is addressed through the tool of fossil fuel divestment."

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The movement

Past campus divestment campaigns have prompted many colleges and universities across the country to sell their holdings in companies doing business in South Africa under the apartheid regime; in Sudan, more recently after the Darfur crisis; and in tobacco companies. UVM has also divested from companies that produce cluster bombs or weapons containing depleted uranium, thanks to an initiative mounted by a student group Toward the end of the Iraq War.

The most recent divestment campaign to sweep the country calls for institutions to get rid of their fossil-fuel holdings. This effort has been spearheaded by 350.org, an advocacy group pushing for societal limits on greenhouse gas emissions that contribute to climate change. The group was co-founded by Middlebury College scholar in residence and climate-change activist Bill McKibben.

Over the past year, six colleges and universities have committed to fossil-fuel divestment, including two in Vermont (Green Mountain College and Sterling College). These endowments are at the low end of the value spectrum for colleges (Green Mountain College’s fund last spring was valued at about $3.4 million, Sterling’s at $960,000). The commitment list is longer for cities that have agreed to remove fossil-fuel investments from pension funds — 18, including San Francisco and Seattle.

At UVM, the Board of Trustees has responsibility for managing the endowment. The trustees’ Subcommittee on Investment provides detailed oversight and reports to the larger Budget, Finance and Investments Committee, which in turn makes recommendations to the full board. Last year, having fielded periodic requests and demands for various divestments over the years, the trustees established a new process for vetting proposals. The process began playing out this past spring.

Under this process, a joint panel of faculty, staff, administrators and students — called the Socially Responsible Investment Advisory Council — invites proposals, evaluates them, researches the promising ones, and makes recommendations to the vice president for finance, Richard Cate, who in turn makes recommendations to the sub-committee.

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In the case of fossil fuels, a student group that formed last year — Student Climate Culture — led the charge with demands that highlighted BlackRock but that also called for phased elimination of all other fossil-fuel holdings. The group garnered endorsements from the Faculty Senate, the Student Government Association and the Staff Council.

This past spring, the advisory council produced a report with recommendations that was given to Cate. It was this report that Cate passed on to the trustees’ subcommittee, which had its first discussion of the matter Wednesday.

The report recommended divesting fully and expeditiously from coal and nuclear companies, but not from those that produce natural gas, which the report calls “a ‘bridge’ for the near term as we attempt to move away from coal investments.” As for oil, the report states:

“Oil will remain an economic and practical necessity for the near to medium term. ... We recommend moving forward, that UVM select the most responsible companies and avoid companies with the highest carbon footprint related to the highly resource intensive practice of oil sand drilling.”

The report also recommended “exit” from BlackRock by October “due to holdings within the coal industry.” BlackRock accounted for 2.4 percent of the total portfolio, according to the report.

The mutual fund that replaced BlackRock, RS Global Natural Resources, represented 3.1 percent of the UVM endowment’s value as of Aug. 31. That fund’s holdings at mid-year were mostly in the energy sector (52 percent) and materials and processing (37 percent). Oil, natural gas and metals producers were prominent among the 39 companies listed. The holdings were not entirely devoid of coal, however. (Turquoise Hill Resources LLD and New Hope Corp. Ltd. were two companies in the portfolio with coal-mining operations, for example.)

Middlebury passes

Middlebury College has the largest endowment fund of any higher education institution in Vermont, with a value of $970 million on July 1.

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The college held a series of forums on divestment during the last academic year. On Aug. 28, President Ron Liebowitz issued a statement that lauded the quality of the debate and enumerated key questions, among them: What would be divestment’s “practical effect”? What would be the impact on future returns? Would divestment from fossil fuels open the door to demands for divestment in other areas?

“At this time, too many of these questions either raise serious concerns or remain unanswered for the board to support divestment,” Liebowitz wrote. “Given its fiduciary responsibilities, the board cannot look past the lack of proven alternative investment models, the difficulty and material cost of withdrawing from a complex portfolio of investments, and the uncertainties and risks that divestment would create.”

He said the college would focus instead on developing strong “ESG” investing principles (environment, social, governance) and using them to monitor the portfolio and steer more investments into companies that meet these standards.

Asked for a comment, McKibben replied by email that the divestment effort in the case of South Africa had taken six or seven years.

“Hopefully it will happen more quickly than that this time around,” he wrote.

Virginia Wiltshire-Gordon, a Middlebury sophomore active in the divestment campaign, welcomed the new commitment to investing principles.

“We are proud to say that we greatly contributed to inciting the actions that the college has committed to taking,” she wrote in an email. “At the same time, they are not enough.

“Our endowment still supports companies that run directly counter to Middlebury's stated mission. We believe Middlebury can do better. We believe anything short of divestment is unacceptable. We will continue to build the movement demanding divestment this year, and we will not stop until our community's investments no longer actively support climate change and injustice."

Meanwhile, McKibben has signaled a new phase of the national campaign. In a recent article in “The Daily Beast,” he said alumni would be making donations to their alma mater’s contingent on divestment.

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In the trustees' laps

When the UVM investment subcommittee met Wednesday, about 20 students showed up. Many carried hand-lettered signs ( such as “Divest or else” and “Where’s your courage?”), but the slogans couldn’t be seen by the trustees, all of whom were participating remotely, by speaker phone. The only people sitting at the table were UVM administrators and staffers.

The trustees made it clear they weren’t close to making a decision on the advisory council’s recommendations.

Bain noted that the university already has proxy voting as a tool for UVM to weigh in on policy matters as a shareholder. In 2008, trustees approved a resolution that would authorize proxy voting according to guidelines developed by what was then called the Socially Responsible Investing Work Group. Bain called proxy voting “the most effective methodology” for bringing issues to attention.

Officials at the meeting agreed, however, that proxy voting is only an option for a few accounts that UVM owns directly, and not for pooled funds that are managed for multiple institutions.

In any case, Bain said, divestment would represent “a different process for investment strategy” and deserved a long and careful look.

Trustee Rob Brennan questioned the report’s assertion that divesting of direct holdings would not adversely affect returns. He called the research “inconclusive” and he’d like to investigate further.

“I think the jury’s out on that statement,” Brennan said.

UVM’s returns were up 13.4 percent in the last fiscal year, which Bain called “very, very good.”

“We need growth of the endowment, and we need people to give to the university to support the endowment, and of course the endowment needs to have good rates of return, so people feel comfortable giving to the university,” Bain said, adding that energy has been one of the “better performing sectors.”

Trustee David Daigle said a key question for him was whether adopting the recommendations would violate his fiduciary responsibility. He also wondered about “the broader issue of using the endowment as a policy tool.”

Bain said the subcommittee members would give the matter further study and take it up again in November.

“We’ll keep discussing this until we have a conclusion that comes out of the investment subcommittee,” he said.